Sentiments Hurt by EU Uncertainties, But Supported by China's Wen

Sentiments took a big hit overnight on news that while the highly anticipated EU summit remains scheduled for today, the meeting between finance ministers was canceled. The arrangement argued that European leaders simply cannot finalize the details of the long-awaited comprehensive package for solving the pressing issues, including bank recapitalization, Greece hair cut and beef-up of EFSF to stave off contagion. Today's EU summit would like prove to be another disappointing event. The news sent DOW down -207 pts while Asian equities opened deeply lower. Euro, though, remained steady in range against dollar throughout. Meanwhile, German lower house will vote on increasing German's backing on increasing the EFSF today.

Nevertheless, sentiments then get a lift in Asian session after China Premier Wen Jiabao signaled change in policies. Wen said the Ministry of Industry is studying "stimulative policies" for smaller companies that're facing global slowdown. And, the officials will made adjustments as a "suitable time and by an appropriate degree", and will maintain reasonable money supply growth. The statement is affirmative to markets' view that China would at least halt tightening measures like rate hike. It also raises the possibility that China would relax credit control towards the end of the year by lowering the reserve-requirement ratio for smaller bank and adopt a rate cut next year. With help from Wen's comment, Asian stocks pared much of the earlier losses.

Australian dollar is notably lower today after release of inflation data. Headline CPI rose 0.6% qoq, 3.5% yoy in Q3, inline with consensus. However, both the RBA trimmed mean and weighted mean missed expectations by rising 0.3% qoq, half of consensus of 0.6% qoq and are the smallest rise since 1997. The data triggered more speculation that RBA would cut rates by 25bps next week even though RBA has so far given no signal on the urgency to cut rates.

Looking ahead, main focus today will be on US durable goods orders, whish is expected to drop -0.7% in September with ex-transport orders up 0.5%. New home sales is expected to improve slightly to 300k in September. Bank of Canada will also release its monetary policy report. CAD was hit sharp overnight after BoC lowered growth and inflation forecast and removed reference to withdrawal of policy stimulus in the statement. Some more volatility would likely be seen today, as triggered from BoC's MPR.